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The CU2.0 Podcast
This podcast explores contemporary, critical thinking and issues impacting the nation's credit unions. What do they need to be doing to not just survive but prosper?
The CU2.0 Podcast
CU 2.0 Podcast Episode 370 Raddon Chief Economist Bill Handel on What's Coming At You
You might know it as the dismal science, but a conversation with Bill Handel, Chief Economist of Raddon, a Fiserv company, is anything but dismal. It in fact is an enlightening romp through the complexities and confusions of today’s global economy.
In the show Handel makes a prediction about the future of interest rates - and, no, don’t expect an imminent return of 4% 30 year fixed rate mortgages.
He also talks about how young adults are adjusting their financial habits to navigate today’s economy.
Importantly, too, Handel explains what is going on in the White House’s attempt to reset the global economy - and he indicates that the present economy is something of an artifact of the aftermath of World War II so there are reasons to think a reset is in order.
But how is a credit union CEO supposed to navigate in a global economy that is filled with uncertainties? Handel’s advice is to create plans that feature built in flexibility - because, really, you don’t know where interest rates will be a year from now. Staying flexible will be key to succeeding, he says.
Handel also says that the operating margins of credit unions have to improve. Period. He tells why in the show.
Dismal science? Not in this show. Here, economics becomes an exciting tool for navigating what’s coming at us.
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Welcome to
SPEAKER_00:the CU2.0 podcast. And now, the CU2.0 podcast with Robert McGarvey.
SPEAKER_02:You might know it as the dismal science, but a conversation with Bill Handel, chief economist of Radden, a Fiserv company, is anything but dismal. In fact, it's an enlightening romp through the complexities and confusions of today's global economy. In the show, Handel makes a prediction about the future of interest rates. That's a question not every credit union executive's mind. And nope, don't expect an imminent return of 3% or 4% in 30-year fixed-rate mortgages. Don't expect it. Handel also talks about how young adults are adjusting their financial habits to navigate today's economy. Got to understand that in the credit union business. Importantly, too, Handel explains what is going on in the White House's attempt to reset the global economy. And he indicates that the present economy is something of an artifact of the aftermath of World War II. That's 80 years ago. So there are reasons to think a reset just might be in order. But how is a credit union CEO supposed to navigate in a global economy that is filled with uncertainties? Ours is. Handel has advice about that, and his core advice is create plans that feature built-in flexibility. Because really, you don't know where interest rates will be a year from now. You don't know a lot of things about the economic climate a year from now. Accept that and know that staying flexible will be key to succeeding, he says. Handel also says that the operating margins of credit unions have to improve, period. Period. He tells why in the show. Dismal science? Not in this show. Here, economics becomes an exciting tool for navigating what's coming at us, and it's coming now. Listen up. So we're going to talk about something that's confusing the heck out of me, which is where interest rates are going. Yeah. For a year now, I've been hearing, oh, I'll delay buying a house because the interest rates will go down. Well, they're not. So what's going on here?
SPEAKER_01:Yeah, no, it's a great question. And it's a lot of interrelated factors that are having an influence here. The first thing to understand is about interest rates is that they have been abnormally low for a long period of time. really since the early 2000s, kind of a reaction and a response to first a series of events. You had the dot-com bust, then you had 9-11, then you had the great financial crisis, then you had COVID, and you had a lot of other factors. All those things have contributed to pushing rates to, by historical sense, very artificially low levels. And those are what we've become used to having, but they're not actually normal, the normal level at which rates should be. So I think there's that long-term issue there. you know, the long-term view of where interest rates should be that is influencing things. So right now, everybody's saying, well, rates need to be lower. But having said that, I think there's probably a better than 99, 95% chance that the Fed will lower rates at their next meeting in September. That's pretty high. I think they tell us what quarter point. Probably quarter point would be, is what they would probably do. If they went more than a quarter point, which probably would make the administration happy, but if they went more than a quarter point, you'd probably see an adverse, actually an adverse reaction by the market in general. And you might see interest rates actually move, longer rates move in a direction that they don't intend either. The interesting thing is that the Fed since September of last year has dropped the Fed funds rate by 100 points, right? They've dropped it by 4% across three cuts. And yet in that same period, short-term or medium-term and long-term rates have both gone up. So the two-year treasury and that same span is up by about 20 basis points, and the 10-year treasury is up by about 70 points. So what you're actually beginning to see is the yield curve take on a much more normal shape which is you know what it's been for a long period of time it's inverted where short rates have been higher the longer rates now it's going it's beginning to flip but it's still not there yet very shortest right like the you know the fed funds or the one month is high then it goes down you know at the two to three year but then goes continues to go back up um i think what you'll begin to see happen is that the fed will slowly drop rates But that will affect the short-term. Longer-term rates are likely to remain at higher levels. They're not going to move in lockstep as the Fed cuts rates, short-term rates.
SPEAKER_02:My sense, and I don't purport to be an expert in this, is that there's not a consensus among economists about the impact tariffs will have on A, inflation, and B, rates. Am I right about that?
SPEAKER_01:Yeah. That's absolutely true. In March and April, especially April when the tariffs were, what did they call it? Liberation Day, I can't remember what the term was. I
SPEAKER_02:remember saying, I'm no economist, obviously, all my heavens, inflation is on us. And a lot of economists were saying, yeah, you're right, you're right. And now it's a much more mixed bag.
SPEAKER_01:Yeah, it's a much more mixed bag. And there's a couple of factors. Number one is that Businesses have absorbed some level of the cost as opposed to passing it on simply because of the impact on demand. That's number one. But the bigger issue is that the actual level of tariffs has not been nearly as large as what the fear was. You know, there was, you know, you're talking, at points you were talking about very, very high levels of tariffs, but really because of negotiations and things that have happened, it's actually been much lower levels. And there's been deferments, like we just saw the deferment with China again, right, in terms of the tariff. I
SPEAKER_02:think the tariff with the EU is 15% on most items, which is, to me, that's a bearable number.
SPEAKER_01:I think that's probably what we ought to count on is like 10%, 15% would be probably where we're going to end up with for most of the world. I think that's actually what I think the administration would be happy with. And honestly, I don't know if you're going to see it come down further. It's possible, but I don't think so. And the reason I don't think so is because that's generating actual real revenue for the Treasury. And the Treasury, at this point, is not going to be very happy to give up any source of revenue that it can generate. Now, again, it's not huge. It's billions of dollars, which, you know, when we talk about$37 trillion of total debt, that's not a big number. But everything is out for the Treasury.
SPEAKER_02:So I think... The Secretary is saying that money will be used to pay down debt.
SPEAKER_01:Right. And it will be. It's just not that. It's not hugely impactful. I hear
SPEAKER_02:you.$37 trillion. Minus$300 million or$3 billion even is a big deal. Now, I'm a credit union executive. Imagine, what am I supposed to make of this situation? People are wanting lower interest rates. We have the uncertainty of the tariffs. Am I supposed to just hide under my desk for six months? I'd be tempted to.
SPEAKER_01:Yeah, I don't think the tariffs are, I honestly don't think tariffs were ever as big of an issue as some people painted to me. I don't think they really will be. I don't think the tariffs are something that is hugely going to be impactful. My sense of it, and this is just my personal opinion, my sense of it is that it was more of a negotiating tactic on the part of the administration as opposed to, with the intent of of eliminating some of the tariffs that happened to be on U.S. goods. There has been truly trade imbalance for about 80 years, really since the end of World War II. And it happened for historical and probably appropriate reasons. Following World War II, the United States stood strong. We hadn't been impacted by the war in terms of damage to our economy or damage to our cities or anything. And the rest of Europe had. And so in order to help Europe rebuild, we merely allowed them to impose tariffs, pretty substantial tariffs on our goods, and we didn't impose anything on theirs. And so that made that easy for them to export to us and difficult for us to export to them, but that helped them rebuild their economies. And that's really the way it's been since the end of World War II. So tariffs, it's been an imbalance. playing field as far as international trade goes. That was really initially targeted for Western Europe as a way to rebuild Western Europe and to withstand against the Soviet Union. That's the whole playbook that was there. Now things are entirely different. The rest of the world has taken advantage, especially China, of a very imbalanced trade policy. I think that's what's trying to be corrected here. So it's really a negotiation that's happening. That's why I don't think tariffs are nearly as big of an issue as some people were painting them out to be, because I think it was really a way to negotiate to a little bit more level of a playing field overall. The bigger issue, I think, for executives is the fact is that with 15 to 20 years of low rates, we've built in an expectation on the part of the consumer in terms of where interest rates should be, particularly in the real estate world. Mortgage rates at 3%, actually less than 3%, 2% in some cases for many people, it's not natural. It's not really where rates should be, but it's where they were. And so what we've basically done is locked up the real estate market because with rates that low and that many people sitting at extraordinarily low rates, so many people can't even afford to buy that next house. Because if that meant that they had to give up their 2% or 2.5% mortgage, and take on another mortgage at 7%, 6.5%, 7%, whatever they would be able to get, they couldn't afford the payment. So that reduces the supply of available housing that's out there. And that, in combination with higher rates, makes home affordability almost impossible for younger millennials or Gen Zs who are out there trying to buy. So the lockup of the real estate market is probably the most pernicious impact the rate policy that went back to the last 20 years. Because with very low rates that we experienced for 20 years, we really bid up the price of real estate because people could afford it when rates were extraordinarily low. They could more afford it when rates were extraordinarily low. And now that rates have gone back up and house prices are at least not yet nationally coming down to any substantial degree, housing becomes extraordinarily unaffordable. So I think that's the first thing that has to get solved. And it is slowly getting solved. People are beginning to loosen up a little bit and be willing to recognize that they're probably gonna have to give up that two and a half to 3% mortgage in order to get that bigger house because their family's wrong. And so I think you're beginning to see that loosen up probably in conjunction with a stabilization or even in some markets, a slight decline in terms of real estate values. So that market is slowly correcting. Still, I think for credit unions, the big growth opportunity still will be in the home equity lending because more people were probably going to choose to add on to the house or fix up their house as opposed, you know, keep that mortgage at two and a half, 3% as opposed to simply selling and taking out a new mortgage to get better place. So home equity lending will probably be a primary lending tool, but I think you still should keep an eye on that first mortgage as an opportunity.
SPEAKER_02:Now, what kind of interest rates on the home equity loans?
SPEAKER_01:You know, they're typically going to be coming in at five and a half, six percent, somewhere in that range, you know, depending on whether it's a line or a loan. If it's a line, it will be tied to prime. If it's a loan, it will be a fixed rate and probably in that same five and a half, six percent. Maybe, you know, some institutions lower, some institutions a little bit higher. But, you know, the advantage for the member there is that they're not they're not financing entire property. They're only financing property. you know, that, that amount that's
SPEAKER_02:50 grand for a new kitchen or something like
SPEAKER_01:that. Right.
SPEAKER_02:Nonetheless, psychologically, they're accepting five and a half or 6% interest. I remember getting a mortgage in 2004 at 6.75%. And I was pretty happy with that rate. It wasn't a great rate, but it wasn't an awful rate. Yeah. And so when I hear people whining about 6%, I think it doesn't sound that bad to me. And you're telling me historically it's actually not bad at all.
SPEAKER_01:No. No. Where mortgage rates are today is really low probably. moderate to low by historical standards. If you go back, if you look at some of the data sets that have been tracked, they don't go back into deep, deep past, but they can go back into the 1970s, 1980s. And even with the recent run-up in terms of mortgage rates, we're still very low by historical norms. I remember the 1980s where mortgages were coming in at 18%.
SPEAKER_02:Right. I have a relative who reminds me that he paid, I think, 14% in 1980. And he was happy.
SPEAKER_01:Yeah. So I think it's a combination of a change in expectations that will happen slowly over time. Plus the lessening, and even in some markets, the reduction in home, the lessening of the rate of increase or even actual reduction in terms of home values in certain markets. We're already seeing that in parts of Texas or Florida, Tennessee, Arizona. We're seeing that already happen to a certain extent. It's not a massive increase. reduction in price that happened in 2008 because that was a very different type of market than what we're in today. But you're seeing at least softening and maybe moderate, you know, slight declines in terms of home values. So that, you know, if that happens and then people change their mind a little bit about, you know, mortgage rates and kind of, you know, settle into the quote new norm, I think you'll see the real estate markets begin to open up a little bit more.
SPEAKER_02:In Phoenix, where I live, projects that had been conceived of as condominiums have been switched to rental properties before they're completed. Is that anomalous? Is that unique to Phoenix, or is that a national trend?
SPEAKER_01:You're seeing that. It depends upon. It's a market-by-market trend that you'll see. So it depends upon what's happening. So in many markets, and I'm not sure if Phoenix were classifying us wrong, but in so many markets, what happened was the COVID impact. The COVID impact was everybody's working remote and all of a sudden they decide that, you know, I want to be able to live in different places. And Phoenix is a nice place to live or Nashville is a nice place to live or, you know, markets in Austin, for example, is a nice place to live. And what we saw was a lot of home, a lot of buying activity happened right as COVID was, you know, impacting the economy. And so then what happened was a lot of buildings started happening as well. When there was a lot of demand for properties in some of those markets where people thought were more desirable, because of warm weather, whatever it happens to be. There was a lot more demand and so therefore there was a lot more building. And so in some cases there was overbuilding that happened particularly in a place like Nashville. Don't know about Phoenix, but I know Nashville, for example, way overbuilt. And so now what's happening is all those builders, they've got it, they're stuck with excess inventory. And so they're just simply trying to figure out, they can't find a buyer, but what they'll do is they'll turn it into a rental property because there are more people who can rent right now but can't buy, especially in the younger part of the population. They simply can't afford to buy at the prices that they're at. So rather than reduce the price, a builder might decide to rent the place. It's a different opportunity overall. So I think that's a little bit of the trend that you're seeing, and it's just kind of a natural result of what happened. We call it the COVID effect, and COVID had effect on so many different places, and it's really continuing to play on.
SPEAKER_02:How has all of this affected, let's call it, people under 30 or 35 and their spending habits and their financial planning? I talked to some young people who've essentially given up on the idea of home ownership. It just seems impossible.
SPEAKER_01:That is a trend that we're watching very closely. It is a mindset that's out there. I won't say it's entirely different than other generations. A lot of people, young people, have come in and felt as though things were unattainable, but then they've been able to attain them over time. It's just that things seem very daunting. But I will say that this youngest generation is probably more stretched than previous generations.
SPEAKER_02:This younger generation has a hell of a lot more student loans than my generation. Right.
SPEAKER_01:No, student loans is a big impact. I think just simply the sheer price of a house, of buying a house, is a very major impact. I also think that inflation was much more impactful for the part of the population that didn't have wealth. So what happened is, you saw the nice run-up in terms of inflation. It's been tamed pretty significantly. We were at 9%. We're now at 2.7%, so it's much better. But just because inflation is not going up at the same pace doesn't mean Prices are coming down. They haven't come down, obviously. They're still high relative to what they were. And really, when you look at wages in the United States relative to inflation, since 2021, we've actually had on an inflation-adjusted basis a decline in wages in the private sector of the economy. So people are making less. People got, you know, they got, if you were young, Let's say in 2021, you got a nice check from the government probably, right? You got a nice check, the COVID check, and everybody felt pretty wealthy. And people saved that, at least initially, because they couldn't spend it. There was no place to spend it. But now people have spent through that. So you have no savings. You have no real wage gain. You've got student loan debt. And you've got an inordinately high home prices in most markets. And it really is not a great picture. And it's making it very difficult for younger consumers as they're beginning to start out to really figure out where to go. So it is a challenge. And it's a big challenge for credit unions and their young membership to solve that problem for them.
SPEAKER_02:Well, I think some credit unions are... solving in part by issuing new car loans. I'm hearing numbers as high as 10 years. I don't know if that's actually true, but it seems to me crazy. I mean, this car is going to be a piece of junk at 10 years. You're still paying 500 bucks a month or whatever. Is what I'm saying about auto loans, is that something that you're tracking, that you're aware of?
SPEAKER_01:I haven't seen a 10-year. I've seen seven years. I think I've seen eight years. I know for sure I've seen seven years. I haven't seen 10. I sure hope it's a card that will last, though, because 10 years is a long, long way. I think the biggest issue for a really important issue for credit unions, it's not just offering the right products, but also really being more engaged in that advisory side and really trying to help that young member to really think about their situation and to make the right kinds of decisions. Sometimes if you can get a... savings of 30 or 40 or 70 dollars a month difference by going from a you know from a five-year loan to a seven-year loan or whatever it would be you might think that's a great plan but it's probably not necessarily a great plan you know somebody could show you that if you can find ways in other areas to increase that payment you're actually going to be much better off and so i think that whole notion of really taking that role of financial advisor very seriously rather than just be a marketer of product, I think is a real important role for credit unions to take with that younger generation. Because, you know, unfortunately, our levels of financial education in this country are not good. We don't do a good job in high school or college of educating our people about how to make prudent financial decisions. I got to tell you a really interesting story. My youngest daughter graduated from college in the last, I don't know, five years or so. And she told me a story about, and I talked with her economics professor. He offered a seminar at the end of the year. that she was graduating about how to buy a car and all the things to consider. And he said it was the most widely attended session he had ever hosted. He was just talking more about real life, how to make the decisions. He wasn't specifically trying to tell them how to buy a car, but it was fascinating because I talked to the professor. He was an economics professor. It's just amazing how little people who are walking into the world, really walking into the world, and have real long-term decisions to make here, financial decisions to make, how ill-equipped they are to make those decisions. They just don't know the basics.
SPEAKER_02:What university is that?
SPEAKER_01:It was a small school in Ohio called Kenyon College. Kenyon is a good school.
SPEAKER_02:Yeah. It doesn't surprise me that they wouldn't have any education on that, because Kenyon is like a liberal arts college. You learn your James Joyce, you don't learn how to negotiate a car lot.
SPEAKER_01:Well, that is true, but you would think that someplace in there, between high school and college, you would think that you could find a place to be able to learn about these things, but it doesn't seem like we really are. And I'll tell you another interesting story is... I heard this from another credit union. They were telling me that they were hosting financial service or financial planning type or financial, you know, education type workshops for young members. And some of their, and they got feedback from the parents of these kids. And the parents said, you know, what you did for my kid was so great, but now can I come and, and, and, participate in this as well. So I don't think our lack of financial literacy is limited to the younger generation.
SPEAKER_02:Speaking for myself, I'd say me and the baby boomers I know are financially illiterate to an extraordinary extent. We've just gotten by because the economy's been pretty good. It's forgiven our mistakes. Now, what should a credit union be doing now to I think this is a time when they have to reassess their whole attitude and thought about loans and et cetera, et cetera. I mean, this is a brave new world we're going through.
SPEAKER_01:Yeah, yeah. It is a different world. Credit unions have always said that they compete on the value of service and things like this, but the reality is... That's not really where they compete. Where they really compete is on price, for the most part. And that they can always come in at a better price. And part of that is the tax advantage that you've got and the You know, it's probably two things. It's a tax advantage, which plays well, but also the fact of the matter is that you don't have stockholders that you have to satisfy. Your stock, your shareholders are your members. And so instead of making a return to stockholders who are not customers, you're making return to shareholders who are members. And so that's always the way that credit needs to be able to have, provide a better deal for the membership.
SPEAKER_02:I don't think many CEOs have very big credit unions. And every single one will tell me, sometimes off the record, that they can beat the rates of the big banks on almost anything and still make it because of the tax advantage, among other things. And also, they don't have to pay an accountant$3 million a year to do their books. I mean, I'm sure they pay an accountant, but they don't need to spend that much, et cetera, et cetera. So, yeah, they have great financial advantages, and they do win on rates.
SPEAKER_01:But then the question is whether or not that should be, whether or not that is enough to be successful long-term, especially with, I think, the change that we're seeing. The people are, there's two major trends that are out there. First of all, especially for younger generation, they want things to be as they, you know, the whole technology thing is very big. And that's not the only thing they make a determination on in terms of who they select, but it is a very big piece. And The industry really has to focus on closing whatever gaps they have to the greatest degree possible on the technology side. It's not an easy thing to do. When you think about how much money a Chase or a B of A or a Wells is spending on technology, right? But you do have to find, you have to identify where those gaps are biggest and you have to be able to close those gaps. And the bigger issue is focus on process. How do you make the process simpler? That's what the consumer is really asking for is how do I make the process simpler? The people will pay for a better process. They're very much willing to do so. There are some people who will always simply be priced. There's no doubt about it. But for more and more people, it's how do you make life simpler for me? So I think there's got to be a big focus on that. But I think that in and of itself will not be enough either. Because I think there's also so much confusion out there in the financial world, and there's so much risk that consumers are really looking for someone who can help them to make better financial decisions. And if you can start... building your brand around that piece, I think that's something that's going to benefit you as an organization. So you're not just simply providing the best rate, but you're actually helping the member to make the right types of financial decisions and things that kind of guide them through life a little bit more. I think it was back in the probably 1990s when there was this first whole really big explosion of financial planning. that happened across the entire financial services space, and it became a very big word. And it's always been kind of there in the background, and it's always had this kind of notion of, you know, whether or not you're, you know, how you're doing the financial planning. And I'm not saying that credit unions should be doing that, but they should be in that role of advisory. I think that's a way to really differentiate yourself as an institution is that you're playing that advisory role and you're really helping the member to make some better financial decisions. I think that is gonna be really key. The other thing I think is, we talked about process. I think the industry's got to find the way to improve process in a way that A, improves the member experience but b also bends the cost curve down because i think margin compression is going to be a fact of life you know it may go up and it may go down but if the long-term trend around margins is going to be compression for the industry. So we're gonna be operating on less spread. We're probably gonna be operating on less levels of non-interest income. I don't think that NSF is going to ever be again a major, major growth opportunity for financial institutions. Even with the CFPB virtually dormant right now, I don't think things like NSF income will ever be the same significant source of income that they've been. And then you already see the pressure that's on things like interchange with Durbin and things like this. So I think we have to think that you look at the operating model If we face longer term compression or at least stagnation of margins, no real growth there. And if we say that non-interest income is not going to grow, then we've really got to find a way to contain our costs. And that means we've got to become a lot more productive, which means our processes have to improve, which means we've got to use AI more effectively in pretty much everything that we do, for example. So I think that's another major trend for the industry to focus in on.
SPEAKER_02:Credit unions are wrestling with AI. A question I ask a credit union, a credit union will say, oh, we've got this new AI initiative, blah, blah, blah. I say, what impact is that going to have on staffing? And what they always say is none. And in my mind, I think, well, there's going to be an impact. There has to be an impact on staffing. There simply must be. A lot of credit unions are operating in a world of delusion about that. They don't want to acknowledge that the machine will take some jobs, period. Furthermore, you need money to pay for the machine. It's not free. ChatGPT doesn't do this work for free. What I'm about to say might sound like a political question. I'm asking you as an economist, not political. The current administration seems to me to be reshaping or attempting to reshape the global economy, the global economic relationships on very fundamental levels. What does that do to an economist's ability to make predictions? I mean, we're seeing a level of change that I don't think has ever occurred in my lifetime. A desire for a level of change that's never occurred.
UNKNOWN:Yeah.
SPEAKER_01:The world is never stagnant, but there are also times of major change. And it's interesting, there's a number of different sociologists slash economists and other people have talked about the big cycle being about 80 years. And it is interesting because if you look at where we are today, it's 80 years from the end of World War II. And I think that was a significant change. And then 80 years before that was the Civil War. And then 80 years before that was the Revolutionary War, so you see these things happening in 80-year cycles. I'm not saying that
SPEAKER_02:that— And earlier you said that basically the economy that sprung up in Europe post-World War II, which we assisted in, that set that world order for a while. Yeah, it did. It did. And that's now being undone, I think, or at least there seems to be an effort to undo it.
SPEAKER_01:It is. It's different. I think the argument that's made about the economy that came out of World War II was that it was done very purposefully, which was to help rebuild, especially Western Europe, you know, against the Soviet Union, against the potential predation of the Soviet Union. And so you wanted to rebuild those economies in Western Europe as quickly as possible. The United States economy is very strong. We could afford to hurt ourselves in terms of the export. We'll make our exports very costly and make imports very cheap for us, which is exactly what we did. But what the long-term effect of that– in the argument is is that what that did is it hauled out the middle class because ultimately it drove manufacturing from places like in the midwest to places like you know uh in asia right for example you know china another japan first japan you know remember that in the 1980s and then you know china after that, or other parts of Southeast Asia. So the notion is that in this economy, what we did is we followed out the middle class. The upper class got extraordinarily rich because international trade is very lucrative, but the middle class was really hurt by this. And that's a little bit of where we are today. I mean, I think the, and again, not to be political at all, but I think when you look at The phenomenon of Trump, I think it's more of a result of not a cause of things that are happening. I think the success of Donald Trump in being elected both in 2016 and 2024 was because of the situation that we were in and the things that he was talking about. He didn't create those things. They were already happening. And then the response of the American population was to vote for him because he represented change in their minds, a movement away from a system that wasn't working for the middle class as well as it had. So I think that paradigm shift is underway. What it exactly will be, it's hard to know because I think we're only at the beginning of the change.
SPEAKER_02:If the change is of the magnitude that I think it's hoped to be, we're really just at the beginning, and there's no charting where it's going to go. This is uncharted territory.
SPEAKER_01:You look at other trends that are happening both internationally as well as domestically, things like population. You know, places like China, places like Japan, places like most of Western Europe, not everywhere, but a lot of parts of Western Europe have a population dearth coming. There have not been nearly enough births to replace the population that's, you know, moving into old age. And so what you've got is economies that are extraordinarily, you know, they're extraordinarily precarious. You know, like, for example, China is trying to keep the second up there, you know, what they might call the economic miracle going, but they don't have enough of their own population to be able to support the strong growth. And so they really are dependent upon exports. And so what does the impact of higher tariffs and restrictions on goods coming in have on them, especially when the number one market is the United States, right? So you have all these kinds of things that are interplaying. And so it creates a lot of uncertainty out there. And I think that's the other thing is that for everyone who's running any organization, whether it's accrediting or anything else, you have to understand that there's two things. There's a lot more uncertainty now than there's probably been at any point in most of our lives. That's point number one. And point number two, there's also a lot more volatility. So the changes that could happen could be very difficult big changes. They're not just subtle changes at the margins, but you could see bigger changes happening overall. For example, I'm not saying China's going to fail, but there are some people who are saying China's going to fail. They're so broke, they've got so much debt in that economy that it's a not sustainable situation. I'm not saying that's true, but I'm saying if something like that were to happen, you realize the impact that it has on the world. It's really hugely significant. Also, you know, you think about U.S. debt,$37 trillion worth of U.S. debt. You know, the number one, other than our own domestic buyers of our debt, the number one buyer of our debt is Japan. Japan is a rapidly aging population, rate savers, but a rapidly aging population. rapidly aging population and they won't be able to buy our debt the same way because all their people are moving into retirement and they have to start using that money to live on. So you have all these various interesting patterns that are emerging out here that are going to impact things in a pretty significant way. It's very different. It's going to be very different economically in
SPEAKER_02:the future than it is now. Over the years, I've talked with a number of CEOs of Fortune 50 companies, very big companies. And one thing I learned is that they think they can deal with anything, but the one thing they hate to deal with is uncertainty. If you say, this is going to happen, oh, well, I'll come up with a plan for that. Yeah, no problem. And they're serious. They're confident. But if you say, well, here's the deal. You can't know what's going to happen. Oh, my heavens, this would be terrible. We're kind of in that situation now. It's like, gee, what's going to happen? I don't know. Yeah.
SPEAKER_01:Yeah, I agree. I don't think we really know. And that's where it makes, that's where what you want to have is you want to have a, you want to have an operating plan as an organization that could, that will be successful in many different types of environments. You know, for a credit union, you want to think, I want to be able to be successful in a high-rate environment or a low-rate environment. I want to be able to be successful in a you know, booming economy or an economy that's going bust. I want to be able to be successful in a place where, you know, technology is really taking off or where technology is kind of, not stalled, but, you know, it hasn't proven out to be the same moon as maybe, you know, it was all anticipated. And so I think you really have to be You have to be much more, you have to give your, you have to really look at and build out a model that works across a wide variety of potential situations that you might find yourself in. And that's not easy to do. It's a very difficult thing to do.
SPEAKER_02:That's the best thing you've said today. You said a lot of good things, but I love that one. That the credit union CEO and executives that need to come up with a flexible plan. that can deal with various economic outcomes. Not easy to do, but it's a wonderful goal and it's probably a necessary goal given that no one knows what the hell's gonna happen. It's very perplexing right now. Before we go, think hard about how you can help support this podcast so we can do more interviews with more thoughtful leaders in the credit union world. What we're trying to figure out here in these podcasts is what's next for credit unions. What can they do to really, really, really make a difference in the financial scene? Can't all be mega banks, can it? It's my hope it won't all be medical banks. It'll always be a place for credit unions. That's what we're discussing here. So figure out how you can help. Get in touch with me. This is rjmcgarvey at gmail.com. Robert McGarvey again. That's rjmcgarvey at gmail.com. Get in touch. We'll figure out a way that you can help. We need your support. We want your support. We thank you for your support. The CU2.0 Podcast.